In Crikey’s experience, it’s harder to get a straight answer out of the Department of Defence than the Catholic Church. And that’s saying something.
Mind you, the mix of multibillion-dollar contracts, secrecy and national security is a potent one — surely up there with the great religions when it comes to matters that must remain out of public scrutiny.
How then will the Albanese government’s much-anticipated national anti-corruption commission (NACC) go when it comes to prising open the golden kingdom of defence contracts, the area considered by many to be ripe for corruption?
The question has gained some urgency following a recent Washington Post investigation — detailed by Crikey last week — which revealed the extent to which the Australian government has relied on the well-paid advice of retired US Navy officials in attempts to acquire a submarine fleet.
The Post’s investigation alleged that some former US Navy leaders have played “critical but secretive roles” during negotiations to acquire nuclear submarine technology from the United States and Britain and have profited from “overlapping interests”.
Much of the debate about the NACC has been in terms of how its powers compare with the various state corruption commissions. Yet defence acquisition occurs on a scale mind-bogglingly more expensive — and more sophisticated — than the usual fare examined by anti-corruption commissions.
How do you compare, say, an investigation into dodgy invoicing by a local council official with one into a transnational, multibillion-dollar defence contractor with intricate financial systems of its own, often tied in with other countries’ security services?
It is to compare apples and oranges. Or more to the point, it risks bringing a knife to a gunfight if we imagine the same investigative techniques can work.
A complex target
Former Australian Federal Police investigator and now anti-corruption consultant Chris Douglas has compiled a list of capabilities that a major defence manufacturer might have at its disposal to thwart corruption investigations.
They include:
- Secure means of communication equal to or better than Australian agencies’ capabilities of penetrating — many defence companies are manufacturers of highly complex secure communication equipment
- Communication via multiple SIM cards and offshore phones under false names and using encryption technology
- Ability to arrange meetings offshore in secure locations
- Access to bank accounts and payment systems located in major financial centres and offshore jurisdictions
- Ability to acquire and use complex corporate structures to hide the movement of funds, as well as the true identities of those involved, including the ultimate beneficiaries
- Technology to detect listening and tracking devices.
Douglas quotes, too, the track record of some of the world’s biggest defence manufacturers, which also have huge contracts with Australia’s defence department.
One of the best known is the case of BAE Systems’ “Al-Yamamah deal”, Britain’s biggest ever arms deal, which involved the sale of £43 billion worth of fighter jets and other equipment to Saudi Arabia. BAE set up a front company with the help of Swiss bankers to conceal payments to Saudi royals and intermediaries. BAE also set up front companies in the British Virgin Islands to funnel payments to agents in several countries.
DCNS, which changed its name to (French) Naval Group, was investigated over the sale of submarines to Malaysia. It followed allegations of corruption that included the payment of €30 million for “technical assistance” to an associate of the former Malaysian defence minister (and later prime minister). Payments were made through a series of shell companies, including one based in Hong Kong.
Siemens was found to have paid US$1.4 billion in bribes to government officials and civil servants in Asia, Africa, Europe, the Middle East and the Americas.
So what’s the answer?
Former Victorian Appeal Court judge Stephen Charles, who is a board member of the Centre for Public Integrity, told Crikey that the NACC would likely have the powers to investigate an Australian government official who took a bribe, though not a “corrupt” third-party actor who might mislead an “honest” Australian public servant “on the characteristics and abilities of, let’s say, aeroplanes that they’re offering”.
“And it’s quite deliberate,” he said. “The purpose is to cut down the enormous amount of work that the commission would be able to administer.”
Charles argues though that the focus of the NACC should be on investigating the scope for corruption prior to entering into a multibillion-dollar contract — a due diligence approach also advocated by consultant Chris Douglas.
The sheer scale of the potential complexity of defence acquisitions, though, was “an indication of the size of the budget” the NACC would require to prevent corruption.
“In something like the submarine case (involving the French Naval Group) if you are doing proper investigation before the contract was made, you would want to send investigators out to Taiwan, to Saudi Arabia, to India, to the other places where they had been dealing with the French Naval Group, and talk with them about both the negotiations with them and the extent to which they are satisfied with the product, if they would be prepared to talk with you.”
Oh, and…
Just over a week ago, Crikey promised to update you on the defence department’s response to our question on what action, if any, had taken place following claims made by a whistleblower in 2019 about irregularities in spending by a defence contractor.
We are still waiting for an answer.
